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“Digital Disruption” - Taxis versus Ride-sharing

Undoubtedly, it has been popular and a great commercial success, much to the detriment of the established taxi industry.

There were initial issues about the legality of private drivers taking fare-paying passengers, but Governments have bowed to public pressure and have allowed Uber to blossom, and left the taxi industry to wither on the vine.

But I’m right behind the taxi lobby, which is understandably furious about livelihoods being trashed by Uber.

Just a quick look at the economics before driving off shows that taxi owners were paying up to $500,000 for a taxi plate in a highly regulated industry.

Owners of the taxi plates then forked out $50,000 for a Toyota Camry Hybrid with the GPS and cameras for security along with regular safety checks and expensive insurances.

I’ve just spent some time in Melbourne sampling various ways of getting around.

A trip from Richmond to the Tullamarine Airport cost me $75 in a cab.

The driver who owned the cab had no kind words for Uber.

He said the cab would gross about $300 in a 12 hour shift.

The driver kept $165 or 55 per cent of the fares, and with most drivers doing five 12 hour shifts (60 hours per week) the drivers would gross about $825 per week.

After paying for fuel and running costs the Taxi owner kept $80 to $90 per shift.

That’s not a great return for anyone considering the hours worked by the driver and the capital outlay by the owner.

He told me that the cab did about 10,000 kilometres per month and had an annual mechanical inspection.

It was also inspected for safety every time it was serviced every month.

The same trip in an Uber would have cost me $44 to $57, or much, much more if there was surge-pricing in peak demand times.

The Uber owner’s only outlay was $32,000 for a Hyundai i40 diesel and a few dollars per week for an iPhone.

The Uber driver also told me that he worked 60 hours per week, broken up into five hour shifts each morning and five hours each evening, six days per week.

He liked the fact that he could spend most of the day-time at home with his family and he would only drive for Uber when the demand was high.

He told me that he was happy to pick me up because I rated very highly with Uber!

I didn’t have the courage to tell him that my Uber rating was based on an N=1 because I’d only taken a single trip with Uber Black before in Sydney which cost me a small fortune to go from Potts Point to Coogee Beach.

The Uber driver told me that he was driving about 8,000 kilometres per month and that he’d done over 200,000 kilometres in the Hyundai i40 in the past two years.

He’d bought the Hyundai because it had a five-year unlimited kilometre warranty and he was fairly sure he wouldn’t be spending anything on the car other than basic service items.

He told me that he made about $2,000 per week doing Uber (minus $120 for fuel plus other vehicle running costs).

At this point in the chaotic world of digital disruption I decided to take a reality check and Google the fine print of Hyundai’s five-year warranty which said that: “Hyundai warrants against defects arising in materials or manufacture for all vehicles other than vehicles used at any time during the warranty period for commercial application.”

I wondered whether the good people at Hyundai would regard an Uber ride-share (aka taxi) as a “commercial application”.

I also thought it was best not to ask about insurance as I was a fare-paying passenger in a private vehicle.

I was after all trusting my safety/livelihood/career into the hands of a total stranger.

I decided definitely not to raise any of these concerns with the Uber driver lest he gave me a bad review which would immediately halve my rating as N would then equal 2 and I might be left by the road-side from now on.

Whilst I’m all for the free-market and competition, unlike many of my colleagues I haven’t fallen in love with Uber.